A company is projected to generate free cash flows of $47 million per year for the...

A company is projected to generate free cash flows of $47 million per year for the next two years, after which it is projected grow at a steady rate in perpetuity. The company's cost of capital is 11.2%. It has $24 million worth of debt and $6 million of cash. There are 14 million shares outstanding. If the exit multiple for this company's free cash flows (EV/FCFF) is 14, what's your estimate of the company's stock price? Round to one decimal place.

Expert Solution

Year	Cash flow	PVIF	Present value
		11.20%
1	47.00	0.899281	42.27
2	47.00	0.808706	38.01
Horizon value =47*14	658.00	0.808706	532.13

Total firm value			612.40

Market value of debt		24
Cash		6
Enterprises Value		612.40
Value of equity		594.40
number of share		14
intrinsic value of per share		42

Horizon value =free cash flow(EV/FCFF) =4714=658

jeff jeffy answered 2 years ago

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